Research That Isn’t Luminous

Philanthropic foundations usually do not bear the costs when the ideas they promote turn out to be wrong. Unlike business capital, which can be lost when executives back bad products, foundations lose nothing when their executives back bad ideas.

One of America’s most active foundations in higher education is the Lumina Foundation.  Founded in 2000 and committed to a goal of raising the percentage of Americans who hold “high quality” postsecondary degrees and credentials to 60 percent, Lumina has distributed more than $250 million in grants in support of its mission.

Last December, Lumina bankrolled a paper published by the State Higher Education Executive Officers (SHEEO) entitled “The Economic Benefit of Postsecondary Degrees.” As anyone familiar with the market for research would guess, the paper’s authors reached the conclusion that Lumina wanted: “(A)lmost without exception, each successive level of higher educational attainment yields additional economic benefits.”

That notion may help to keep the higher education bubble inflated for a little longer since it buttresses the old conventional wisdom that the more formal education a person has, the better he or she will do.

As we will show, the authors’ conclusion is based upon the unwarranted assumption that because people who earned higher levels of educational attainment in the past have enjoyed greater earnings, it follows that people who do so in the future will also enjoy greater earnings. They have ignored information indicating that the future is not likely to be the same as the past when it comes to the connection between formal education and earnings.

Furthermore, the authors proclaim this policy conclusion: “Expanding higher education degree attainment is clearly an essential and powerful strategy for economic development in a state.”

The trouble is that nothing in the paper shows that the “strategy” of putting more people through college has anything to do with economic development in a state. Available research shows that the correlation between higher education spending and state economic growth is weak to nonexistent. Unfortunately, that research was also overlooked.

Although the authors concede that some people “question the value of a college degree,” they mention only that there have been some “media stories” focusing on individual hardship cases and examples of people who have succeeded without a college degree. Indeed, there have been such stories, but the case that we have oversold higher education goes much deeper.

Numerous books (e.g., Professor Jackson Toby’s The Lowering of Higher Education in America) and papers (e.g., the Pope Center’s “The Overselling of Higher Education”)   have criticized the belief that higher “educational attainment” is necessarily worth what it costs. To admit that their position has opposition but then dismiss that opposition by suggesting that it amounts to just a few “stories” is misleading.

With a great deal of data, “Economic Benefit” demonstrates that in the past most college graduates were able to find relatively high-paying jobs, compared with people who had less formal education. There is no reason to question that correlation, but good reason to doubt that the relationship is causal, implying that individuals who stopped their education after high school would have obtained higher paying jobs if they had gone to college.

Many young people don’t continue their education past high school because they find college too difficult or because they realize that even if they earn a degree, they are apt to wind up working in “high school” jobs anyway. The latter point is especially crucial to the “millennial generation.” Increasingly, they find that college is very costly but guarantees them no financial return at all.

Students’ investments in college education have climbed to an all-time high—with the cost of tuition up by more than 300 percent since 1990 and student debt now totaling more than $25,000 on average. But many students are discovering that college degrees no longer have the labor market impact they once did.

A 2012 Associated Press study (discussed in this Atlantic article) indicated that more than 53 percent of bachelor’s degree holders under the age of 25 were either unemployed or working at a job that has nothing to do with their degree.

Similarly, a recent report by PayScale shows that the most commonly reported jobs held by millennials, such as merchandise displayer and cell phone sales representative, do not require college education.

And the latest study of educational attainment and the labor market by the Center for College Affordability and Productivity finds that there has been a steady increase in the percentage of college graduates who are employed in low-skill, low-pay jobs.

If you look at current data, it’s clear that the U.S. is now “producing” more college graduates than there are jobs that pay well enough to cover the cost of earning a degree. That being the case, a study that looks backward at data for workers up to 64 years of age (as the SHEEO study does) greatly overstates the benefit of postsecondary education.

And there is one more critical point that the authors of the SHEEO paper miss—many students coast through college these days without learning much. As we have increased the percentage of high school graduates who go to college over the last several decades, academic standards have (predictably) declined. In their book Academically Adrift, Richard Arum and Josipa Roksa found that a high percentage of college students learn very little even if they graduate.

The numbers of college graduates have gone up, but learning has generally gone down. Combine those facts and it’s easy to see why looking to the apparently high return on college investment in the past does not justify the conclusion that students should expect similar results in the future.

Regarding the paper’s big policy conclusion, is higher education a strategy for economic development in states? The authors assert that promoting higher education is “clearly an essential and powerful strategy” for state economic development.

Absolutely nothing in the paper supports that conclusion.

All the paper’s data show is that in each state, individuals with higher levels of formal education on average earn more than do individuals with lower levels. It does not follow that a state will boost its economy by increasing the percentage of citizens who have a college education.

Scholars have been looking into the relationship between levels of formal education and economic growth for some time and their findings show that increasing the level of education among the populace is neither a necessary nor a sufficient condition for economic growth.

In Does Education Matter? Professor Alison Wolf of the University of London examined that question at the international level. She concluded that it is a myth that a nation can pull itself up economically by “investing” in education. Expanding and promoting formal education, she writes, “threatens to undermine the real, if partial symbiosis between education and the economy that currently exists.”

Richard Vedder’s 2004 book Going Broke by Degree, examined the question at the state level. Professor Vedder writes that he was surprised to find a negative relationship between a state’s spending on higher education and its economic growth. He explained his counterintuitive finding by observing that marginal increases in government spending on higher education redistributes income from taxpayers to the university community but do very little to augment the human capital of students.

How rapidly a state’s economy grows depends on a large number of factors. Government policies to push formal education are neither necessary nor sufficient to catalyze growth. Even if a state (or a nation) “produces” more graduates, there is no reason to believe that those people will necessarily learn skills to make them more productive or, even if they do, that jobs utilizing those skills will materialize for them.

In short, a state (or a nation) can’t pull itself up by the bootstraps by pushing higher education.

The Lumina Foundation has its mission of greatly increasing the number of Americans who go to college, but that mission is as much at odds with sensible policy as it would be to advocate massive printing of money as the pathway to national prosperity. The ideal higher education policy is to allow a true market for education and training in which all modes, from accredited college coursework to individual learning, compete without favor or hindrance.